The Federal Open Market Committee yesterday lowered its target for the federal funds rate to a range of zero to 0.25%.

The Fed also cut the discount rate 75 basis points to 0.50%, and established interest rates on required and excess reserve balances of 0.25%.

The statement issued by the FOMC after its meeting noted a worsening labor market and weaker consumer spending, business investment, and industrial production. “Financial markets remain quite strained and credit conditions tight,” it said. “Overall, the outlook for economic activity has weakened further.”

Meanwhile, the panel saw prospects for inflation diminish “appreciably,” expects inflation to moderate further in coming quarters as the prices of energy and other commodities fall, and sees weaker prospects for economic activity.

“The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability. In particular, the committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time,” the statement said.

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